Equity mutual fund investors sit out market rally-Lipper

Thu Oct 4, 2012 7:35pm EDT

By Daniel Bases
    NEW YORK, Oct. 4 (Reuters) - Mutual fund investors shunned
equities for the eighth straight week, pulling nearly $2.4
billion from the market in the week ended Oct. 4, a period where
benchmark stock indices advanced, new data shows.
    In fact, for 10 out of the last 11 weeks, U.S. domiciled
equity mutual funds have had net outflows, according to Lipper,
a Thomson Reuters' service.
    Even when including exchange traded funds, which are
generally believed to represent the investment behavior of
institutional investors, equities overall had net outflows of
over $2.8 billion during the week.
    Mutual funds are thought to reflect retail investment
behavior.
    In the latest weekly reporting period, the U.S. benchmark
Standard & Poor's 500 stock index rose over 1.2 percent.
In the last 11 weeks, the index has risen 8.45 percent.
    On a price return comparison basis over the last 11 weeks,
the Barclays U.S. Aggregate bond index has returned 4.83
percent.
    "It was pretty much business as usual this last week. Equity
fund investors remain unconvinced of this rally despite a week
when the market was up more than 1 percent. They withdrew $2.4
billion for an eighth straight week of withdrawals, the biggest
amount in the last two months," said Jeff Tjornehoj, head of
Lipper Americas Research.
    Taxable bond funds pulled in $2.55 billion, a 13th
consecutive week of inflows. However, the volume of fresh cash
for the sector was down over 36 percent from the prior period.
    Money market funds saw nearly $9 billion in net redemptions.
    Tax-free municipal bond funds took in a net $553 million for
the week. In the last 52 weeks, the sector that was shunned for
much of 2011 has had only two weeks of net outflows.    
    The risk aversion was not limited to equities, as high yield
funds had nearly $900 million in net sales, and marked a second
consecutive week of net outflows.
    The government mortgage bond category pulled in $659 million
when including ETFs. However, much of that inflow could be
ascribed to a single fund, which reports on a weekly basis.
    The DoubleLine Total Return bond fund pulled in
$468 million in the latest week, bringing assets under
management to over $33 billion, according to the Lipper data.
The firm is run by bond maven Jeffrey Gundlach, who has scooped
up huge amounts of cash since starting DoubleLine in 2010.
    "DoubleLine may have skewed the government mortgage category
this week. They took in half a billion dollars and that makes up
the lion's share of weekly flows. What we are seeing from this
is a very product driven environment," said Tjornehoj.
    In addition to DoubleLine, Pimco's Total Return Fund
, which is the largest bond fund in the world, and
TCW's Total Return Bond Fund were seen as big buyers
of mortgage backed securities before the U.S. Federal Reserve
announced its third round of quantitative easing measures.
    The so-called QEIII measures mean the Fed will buy $40
billion in government-backed mortgage debt each month until the
job market improves significantly.
    On Friday, the U.S. reports September unemployment figures
with economists polled by Reuters predicting 113,000 new jobs
and unemployment rising to 8.2 percent from 8.1 percent in
August.
    The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
    The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions):
 Sector                    Flow Chg   %       Assets      Count
                           ($Bil)     Assets  ($Bil)      
 All Equity Funds          -2.803     -0.10   2,893.274   10,041
 Domestic Equities         -3.433     -0.16   2,197.797   7,437
 Non-Domestic Equities     0.630      0.09    695.477     2,604
 All Taxable Bond Funds    2.550      0.17    1,466.041   4,614
 All Money Market Funds    -8.938     -0.39   2,282.824   1,392
 All Municipal Bond Funds  0.553      0.18    313.406     1,334
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